Why Government support for arms exports should be cut

Talk to the All-Party Parliamentary Group on Conflict Issues, 10 November 2010

Summary[1]

The Comprehensive Spending Review heralds significant cuts to public services, public investment and the incomes of millions of people in the UK. However, even though arms can exacerbate conflict, support aggression or increase tension; give succour to an oppressive regime or undermine democracy; or threaten social welfare through the level of military spending, the arms companies continue to enjoy political and financial support from Government.

Three myths underpin this support. In an event jointly hosted by the APPG on Conflict Issues and the Campaign Against Arms Trade (CAAT) Nicholas Gilby and Symon Hill will explain how these myths disguise the arms industry's dependency culture.

Nicholas led CAAT's efforts to expose the long history of corruption at the heart of the UK's arms deals with Saudi Arabia. He is the author of the latest edition of The No-Nonsense Guide to the Arms Trade.

Symon is associate director of Ekklesia, a think-tank which explores the role of values, ethics and religion and in public life. He was CAAT's media spokesperson from 2006-2009 and is currently a member of its Steering Committee.

Symon Hill:

Thank you for the opportunity to address you. My name is Symon Hill. I am here on behalf of the Campaign Against Arms Trade with Nicholas Gilby.

Context

The Comprehensive Spending Review heralds significant cuts to public services, public investment and the incomes of millions of people. So, not surprisingly, many interested parties have recently been justifying their claims on the public purse and explaining why cuts to their activities would be harmful.

The arms industry is no exception. The UK National Defence Association[2] and the Defence Industries Council[3] have published a number of papers[4]. In sum, they call for an increase in military spending and exports. They highlight the contribution they think the arms industry makes to the UK economy.

Today Nicholas and I want to explain that many of the arguments in favour of Government support for arms exports are based on myths. We think this support is unjustified and should be cut. This step would also lessen the global proliferation of advanced weapons systems. It would help promote sustainable global security.

Nicholas Gilby:

Myths about the arms industry

Currently, three important myths intrude into the debate about arms exports. First, industry and Defence Ministers claim a UK arms industry is a necessary and "formidable strategic asset"[5]. Secondly, they claim the arms industry is economically important, partly because of the jobs it provides. And finally, it is often claimed that the UK export licensing system only permits "responsible" exports and hence a benign arms trade.

The myth that the UK arms industry is a necessary and strategic asset

Two arguments underpin the myth that the UK arms industry is a necessary and strategic asset.

The first is made by the Defence Industries Council. They say the UK needs a "strong national defence industry" because "we need national control over the equipment we use"[6]. They argue that when the Armed Forces need equipment urgently, a "national" arms industry is needed because UK suppliers deliver "in a way that overseas suppliers often cannot"[7]. And, so the argument runs, exports are essential so that our "national" arms industry can survive.

But this is a myth. Some of the industry would survive without exports.

The UK has no "national defence industry". BAE Systems' current advertising campaign makes great play of its British roots, but it has more workers in America than here. It lists seven countries as "home markets"[8]. Other major companies with UK roots that produce arms, such as Rolls Royce, QinetiQ, Ultra Electronics and Cobham, are international businesses, with production taking place across the globe.

The Armed Forces do not have "national control" over their weapons. All significant equipment purchases for the Armed Forces include hundreds or thousands of imported components and sub-systems[9]. As in every other country, the Armed Forces are dependent on the international arms market[10].

The Strategic Defence and Security Review envisages the development of military partnerships. Major operations overseas are likely to be undertaken in cooperation with other nations[11]. The review foresees a collective maintenance of military capabilities with key partners[12]. Last week the Government announced it would develop a Combined Joint Expeditionary Force and bilateral procurement co-operation with the French[13]. Problems will be faced by the UK's partners too. They do not necessarily need a UK solution.

I want to turn now to the suggestion that arms exports help achieve UK foreign policy goals.

Last week the Government told Parliament that arms exports enhance "relationships with key strategic partners". It plans "an active and innovative programme" of "defence diplomacy"[14]. In March Dr Fox said arms exports should be "foreign policy tools"[15].

No doubt it is true that in the short-term an arms deal can help the UK curry favour with an obnoxious regime. But in the long term, relationships based on arms deals often give the buyer leverage over the seller rather than the other way around, as the example of Saudi Arabia shows.

A responsible foreign policy should be about bigger issues, such as creating sustainable security for the UK and the wider world - not based on the naÏve and unrealistic premise that sustainable security can be achieved through military force or balance of power politics. As the West's recent experience in Afghanistan and Iraq has demonstrated all too clearly, expensive high-tech weapons do not produce sustainable peace and security. Encouraging other countries to adopt such a flawed approach to security by foisting arms upon them is extremely misguided. The idea that arms sales support a responsible foreign policy is a myth.

The myth that the arms industry is economically important

The suggestion that the arms industry is economically important is a myth too. Let's look at jobs first.

The latest available Ministry of Defence figures from 2007/8 show that arms exports supported 65,000 jobs[16]. This was a tiny proportion of all jobs in the UK - 0.2% - and around 2% of manufacturing jobs[17].

Another 150,000 people produced equipment for the Armed Forces[18]. But even the overall total of 215,000 arms industry jobs made up less than 0.7% of all UK jobs[19].

The recent job creation record of the arms industry is not strong either. During the first few years after the end of the Cold War, arms exports supported around 150,000 jobs[20].

Since the mid-nineties the number of jobs in the UK has increased from just under 26 million[21] to just over 29 million today[22]. But jobs in arms exports have gone in the other direction. In the last decade the number has fluctuated between 50,000 and 70,000[23].

Jobs supported by Ministry of Defence procurement are down from around 270,000 at the end of the Cold War[24] to around 150,000 today[25]. And the arms industry cannot necessarily find skilled workers in the UK to fill the jobs that exist. One recent report claimed that BAE Systems had to look in Poland for the welders it needed to build the two new aircraft carriers[26].

Can the industry turn this around in an era of cuts? Two weeks ago Jane's Defence Weekly wrote that "Government hopes of igniting a UK-led export boom to offset the shrinkage of procurement opportunities at home appear at best misplaced"[27]. It is not hard to see why. For most of the big export orders secured these days involve little manufacturing in the UK.

Take the two most recent examples. Three months ago BAE sold 57 Hawk jets to India. All of them will be made there. This deal may be worth £700 million but it will only generate around 200 jobs in the UK[28]. Just a few weeks after this deal was announced, BAE said it would shed 212 jobs at the plant at Brough which makes the Hawks[29]. Reports suggest that BAE's proposed sale of naval vessels to Brazil will see the ships manufactured in Brazil, not here[30].

These are not the only examples. The previous sale of Hawks to India in 2004 led to two-thirds of the aircraft being made in India[31]. The recent sale of Eurofighter Typhoon to Saudi Arabia, the UK's biggest arms deal for a long time, also involves two-thirds of the aircraft being manufactured abroad[32].

The wider value of arms exports to the UK economy is also exaggerated. They account for just 1.5% of all exports[33]. Even this figure vastly overstates their importance, for around 40% of the value of the exports was imported in the first place[34].

Much of the argument the arms industry puts forward these days is based on figures produced by Oxford Economics in a report entitled "The economic case for investing in the UK defence industry"[35]. In March, Dr Fox uncritically repeated its figures for output and jobs, as well as some of its other claims[36].

But what no one bothered to tell him was that the report also shows the arms industry has a very average record relative to the sectors chosen for comparison by Oxford Economics. The arms industry came 15th out of 27 in terms of value added contribution to GDP[37]. It came 13th out of 27 on gross output multiplier[38]. And on export intensity the arms industry is below average (13th out of 22[39]), in spite of all the support it receives from Government and other industries do not.

Oxford Economics rightly says that many arms industry workers are highly skilled[40]. However, it does not follow that these skills would be lost if there were fewer jobs in the arms industry. Dr Sandy Wilson, Vice-President of the arms industry lobby group ADS, told the Defence Committee two months ago that "the skills that might be divested of a reducing defence industry do not just sit there waiting to come back. They will be mopped up by other industries that need such skills...You can think of the upsurge in nuclear and alternative energy as being two areas that would mop up those people almost immediately"[41].

To recap, the argument that the arms industry is economically important is a myth. Its job creation ability is in long-term decline and unlikely to improve. Its performance against other sectors is unexceptional, and its skills could easily be absorbed elsewhere.

The myth that UK arms exports are responsible

The last of our three myths is that the current export licensing system facilitates "responsible defence exports" and ensures that "sensitive goods and technology are kept out of the wrong hands"[42].

As the previous Government's Defence Industrial Strategy acknowledged, the cost of developing and producing modern weapons systems means that their service lives will be longer[43]. It is wrong to pretend that any export licensing system can properly assess the risk of arms exports falling into the wrong hands or being used "irresponsibly" in future decades. It is possible, but by no means certain, that at the time licences are granted, the risk assessment is robust[44]. But there is no guarantee at all that this will be the case for the lifetime of the exported equipment. This argument applies equally to the export of sub-systems, components or parts of major weapons systems which are ultimately manufactured abroad.

Let's take one prominent recent example. In 2009 the previous Foreign Secretary told Parliament that some of the combat aircraft, helicopters, and naval vessels used by the Israeli Defence Forces in Operation Cast Lead[45] "almost certainly contained British-supplied components" licensed for export by his Government[46]. If officials thought there was a risk the components could be used as they were in Cast Lead when they approved the licences, then the Consolidated EU and National Arms Export Licensing Criteria were being deliberately ignored. If, on the other hand, officials thought there was no risk the components could be used as they were, then the system of risk assessment is clearly ineffectual.

Parliament was also told that some of the armoured personnel carriers used by the Israeli Defence Forces were converted Centurion tanks supplied by the UK in the late 1950s. Self-evidently, no official in the late 1950s could have foreseen Operation Cast Lead and the equipment that would be used during the operation.

If our objective is to prevent the Israeli Defence Forces using their UK-supplied equipment in a manner the public disapprove of, then the export licensing system as it currently operates will not help us. The only solution is to refuse in the first place to permit the Israeli Defence Forces or their US suppliers to buy the UK components they want.

For there is no way that military equipment can be controlled once it leaves these shores. Assurances from foreign Governments about the use of UK equipment are worthless, as the previous Government eventually conceded[47]. The risk of rupturing diplomatic relations, and the difficulties of gathering reliable information in war zones, means that attempting to influence foreign Governments as to where and when they use their UK-supplied weaponry is an impossible task. If the Government permits arms exports, we must accept that foreigners are free to do with their purchases as they think fit, and also accept our share of the responsibility for the negative consequences.

Symon Hill:

"Progressive" cuts to the arms industry

The Government faces a difficult financial situation. The arms industry too faces cuts as the Ministry of Defence retrenches. At Farnborough Dr Fox said the pill would be sweetened by a Government arms export drive[48]. We do not doubt the Government has what Mr Luff calls a "full-blooded"[49] commitment to this dismal quid pro quo. Last week four Ministers attended a major arms export symposium in Central London[50]. A senior civil servant told delegates that the Prime Minister himself was now selling arms on overseas visits, in competition with Messrs. Clinton, Medvedev, Berlusconi and Sarkozy[51]. The Foreign Secretary's first external meeting was held to "discuss BAE's concerns about overseas commercial opportunities"[52].

But there is no justification for continuing to spend significant sums of taxpayers' money on promoting the exports of an industry which is an average performer at best, and does not contribute to sustainable global security. The Defence Industrial Strategy accepted the view of a group of independent and Ministry of Defence economists who found that the "economic costs of reducing defence exports are relatively small and largely one off...as a consequence the balance of argument about defence exports should depend mainly on non-economic considerations"[53].

The previous Government abolished the Defence Export Services Organisation, but arms exports continue to receive official assistance far in excess of other industrial sectors. An arms sales unit still exists - the Defence & Security Organisation within UK Trade & Investment, known as UKTI DSO. This unit has 158 staff engaged in arms sales. All other non-arms sectors have 137[54]. Arms sales account for 54% of sector-specific staff resources, but only 1.5% of total exports[55].

There are other Government costs, such as promotional work by Defence AttachÉs in the Embassies abroad, and by officers in the Armed Forces. Ministry of Defence procurement decisions have been distorted to promote exports. This is more likely when "exportability" is a procurement policy goal, as it now is[56]. Past subsidies have also included the disproportionate use of the Export Credits Guarantee Department to underwrite deals.

So what should be done? First, it is important that Parliament maintains its scrutiny of arms exports. The Committee on Arms Export Controls should be revived, but with more focus on whether it is appropriate for the Government to be promoting and permitting arms exports in the first place.

UKTI DSO should be shut down, without transferring its functions elsewhere. Export credit support for military projects should be banned. There should be a presumption that arms exports will be refused.

What about the jobs? In March Dr Fox claimed that the Campaign Against Arms Trade would not be happy until every last worker in the arms industry was out of a job[57]. This was a travesty. Some politicians appear to be unconcerned about throwing public sector workers on the scrapheap, but we do not relish people losing their jobs.

The Campaign Against Arms Trade has always argued for a programme to help arms industry workers find alternative worthwhile employment. The Government should help them to use their valuable and sought-after skills,and should invest in industries of the future, such as renewable energy. So we welcome the recent announcement by the Business Secretary Dr Cable of a new Skills and Retention Job Group to ensure that high-value skills in the arms industry can be effectively redeployed[58]. This is far preferable to having these workers make the instruments of oppression and destruction for the next generation of the world's tyrants.

Thank you for listening.

Notes

  1. All-Party Parliamentary Group on Conflict Issues
  2. The UKNDA exists to campaign for "sufficient, appropriate and fully funded Armed Forces to provide an effective defence of our country, its people, their security and vital interests wherever they may be." The founders of this lobby group were John Muxworthy, Lord Owen, Lord Guthrie, Winston S Churchill, Lord Craig, and Lord Boyce.
  3. The Defence Industries Council aims to take a strategic perspective of the interests of the defence industry and represent them effectively to Government.
  4. The UKNDA has published A Decision the Next Prime Minister must make by L.A. (Tony) Edwards (2009), and Submission to the Government and the Nation on the Strategic Defence and Security Review 2010. The DIC has published Securing Britain's Future and Prosperity (2009) and The economic case for investing in the UK defence industry by Oxford Economics (2009).
  5. Dr Liam Fox speech at Farnborough International Air Show, 20th July 2010, p6.
  6. Securing Britain's Future and Prosperity (2009), p5.
  7. Securing Britain's Future and Prosperity (2009), p6.
  8. BAE Systems
  9. Eurofighter contains more than 2,000 components supplied by US companies. (Defense news). There are over 6,000 parts in the Apache manufactured literally worldwide," (John Schibler, director of Apache engineering at Boeing) Guardian, 29 July 2006
  10. Furthermore, the authors of the Strategic Defence and Security Review did not say that securing independence of action for the Armed Forces was part of the reason for the arms export drive now planned by the Government. See Securing Britain in an Age of Uncertainty: The Strategic Defence and Security Review, p66.
  11. Securing Britain in an Age of Uncertainty: The Strategic Defence and Security Review, p59.
  12. Securing Britain in an Age of Uncertainty: The Strategic Defence and Security Review, p17.
  13. Ministry of Defence
  14. Hansard, 1st November 2010, Col 597W-598W.
  15. Dr Liam Fox, speech at an ADS event, 19th March 2010, p5.
  16. UK Defence Statistics 2009, Table 1.10 "Employment from Defence Exports". These figures have been discontinued by MoD because the data do not directly support MoD policymaking and operations. Note: the figures quoted on page 11 of The economic case for investing in the UK defence industry, by Oxford Economics (2009), are based on 2006 data.
  17. Table 5(2) of Labour Market Statistics, June 2009, Office for National Statistics, shows that in March 2007 there were 31,390,000 jobs in the UK, with 3,210,000 in manufacturing. In March 2008 there were 31,643,000 jobs in the UK, with 3,154,000 in manufacturing.
  18. UK Defence Statistics 2009, Table 1.10 "Employment from MoD Expenditure" subhead "Equipment Expenditure". These figures have been discontinued by MoD because the data do not directly support MoD policymaking and operations.
  19. Table 5(2) of Labour Market Statistics, June 2009, Office for National Statistics, shows that in March 2007 there were 31,390,000 jobs in the UK. In March 2008 there were 31,643,000 jobs in the UK.
  20. UK Defence Statistics 2003, Table 1.9 "Estimated UK Employment dependent on MoD expenditure and defence exports".
  21. Labour Force Survey (LFS) Historical Quarterly Supplement, Office for National Statistics
  22. Labour Market Statistics, Office for National Statistics (September 2010)
  23. See UK Defence Statistics 2006, Table 1.9 "Estimated UK Employment dependent on MoD expenditure and defence exports" and UK Defence Statistics 2009, Table 1.10 "Employment from MoD Expenditure", subhead "Equipment Expenditure". These figures have been discontinued by MoD because the data do not directly support MoD policymaking and operations.
  24. UK Defence Statistics 2003, Table 1.9 "Estimated UK Employment dependent on MoD expenditure and defence exports".
  25. UK Defence Statistics 2009, Table 1.10 "Employment from MoD Expenditure" subhead "Equipment Expenditure". These figures have been discontinued by MoD because the data do not directly support MoD policymaking and operations.
  26. Daily Mail, 2nd October 2010
  27. Jane's Defence Weekly, 27th October 2010.
  28. UKTI press release, 18th August 2010
  29. Yorkshire Post, 9th September 2010
  30. Aerospace and Defence News, 27th October 2010
  31. BAE Systems
  32. Jane's Defence Weekly, 5th March 2008 and Jane's Defence Weekly, 25th August 2010.
  33. UK Defence Statistics 2008, Table 1.14 "Estimates of Total Export Deliveries & Orders: Defence Equipment & Services" and Exports and imports of goods and services, Office for National Statistics.
  34. The Economic Costs and Benefits of UK Defence Exports, Centre for Defence Economics, University of York (2001), p11.
  35. The economic case for investing in the UK defence industry by Oxford Economics (2009).
  36. Dr Liam Fox, speech at an ADS event, 19th March 2010, p3.
  37. The economic case for investing in the UK defence industry by Oxford Economics (2009), p12.
  38. The economic case for investing in the UK defence industry by Oxford Economics (2009), p16.
  39. The economic case for investing in the UK defence industry by Oxford Economics (2009), p32.
  40. The economic case for investing in the UK defence industry by Oxford Economics (2009), p3.
  41. Minutes of evidence taken before the Defence Committee on the Strategic Defence & Security Review, 8th September 2010, HC 451-i,
  42. United Kingdom Strategic Export Controls: Annual Report 2009, The Stationery Office, 27th July 2010, HC 182, p3.
  43. Defence Industrial Strategy, Ministry of Defence, Cm 6697 (December 2005), p6.
  44. Even at the time licensing decisions are made, some reasonable observers think they are questionable. For example, in 2006 the Quadripartite Committee concluded that "all applications from Saudi Arabia should be considered more carefully". See Defence, Foreign Affairs, International Development and Trade and Industry Committees: Strategic Export Controls: Annual Report for 2004, Quarterly Reports for 2005, Licensing Policy and Parliamentary Scrutiny, The Stationery Office, HC 873, 3rd August 2006, pp74-76.
  45. Operation Cast Lead was the name of the operation launched by the Israeli Defence Forces in Gaza on 27th December 2008. It lasted until 21st January 2009.
  46. Hansard, 21st April 2009
  47. Strategic Export Controls: Annual Report for 2002, Licensing Policy and Parliamentary Scrutiny: Response of the Secretaries of State for Defence, Foreign and Commonwealth Affairs, International Development and Trade and Industry, The Stationery Office, Cm 6357, October 2004, p11.
  48. Dr Liam Fox, speech at Farnborough International Air Show, 20th July 2010, p4,5,7.
  49. Peter Luff, speech at the Honourable Artillery Company, London, 2nd November 2010.
  50. UKTI DSO Symposium Programme
  51. An Analysis of the Global Defence & Security Export Market, Chris Baker, Operations Director UKTI DSO, slide 14.
  52. Foreign and Commonwealth office
  53. Defence Industrial Strategy, Ministry of Defence, Cm 6697 (December 2005), p47.
  54. UKTI Corporate Plan 2010-2011, UK Trade & Investment, March 2010, pp38-39.
  55. UK Defence Statistics 2008, Table 1.14 "Estimates of Total Export Deliveries & Orders: Defence Equipment & Services" and Exports and imports of goods and services, Office for National Statistics.
  56. Hansard, 1st November 2010, Col 597W-598W.
  57. Dr Liam Fox, speech at an ADS event, 19th March 2010, p5.
  58. BIS Press Release 21st October 2010